Union Pacific sees record 2012 results despite coal

Thu Apr 19, 2012 11:40am EDT

(Reuters) - Union Pacific Corp (UNP.N), the No. 1 U.S. publicly held railroad, on Thursday reported quarterly results that beat forecasts, driven by pricing gains, fuel surcharges and double-digit freight revenue increases in four of its six business groups.

The company reiterated its call for record results for the full year, but told analysts its second-quarter earnings would not rise at the same rate as the first quarter with coal volume weakness the main hurdle.

"We still expect record earnings in 2012, but quarterly comps will get a little bit tougher - particularly in the second quarter," Chief Financial Officer Rob Knight said on a conference call. "Softer coal demand will pose an even greater challenge for us in the second quarter. That being said, we still expect volumes to be on the positive side of the ledger for the full year."

Total volume rose 1 percent compared with the first quarter a year ago, as growth in auto, industrial product, chemical and intermodal shipments offsets coal volume that slid on mild winter weather and decade-low natural gas prices.

The company's share price, up more than 2 percent after the results in pre-market trading, are down 0.9 percent in early trading at $108.71 on the New York Stock Exchange. The Dow Jones Transportation average .DJT is down 0.5 percent.

"This may be another case of buy the rumor, sell the news - the rumor being that they were going to beat the Street and that expectations were set at an achievable level by management," said Marshall Front, chairman of Front Barnett Association.

"We continue to buy the stock and have a price target of $129," he said.

The Omaha, Nebraska-based company said net income rose to $863 million, or a first-quarter record of $1.79 per share, in the first quarter from $639 million, or $1.29 a share, a year ago. That topped the average Wall Street forecast by 16 cents a share, according to Thomson Reuters I/B/E/S.

Quarterly operating revenue rose 14 percent to a record $5.1 billion, above analyst forecasts of $4.97 billion, according to Thomson Reuters I/B/E/S.

"Although softer coal demand remains a challenge, the benefits of our diverse franchise should support continued opportunities in other markets, driving record financial results for the year," Jack Koraleski, Union Pacific Chief Executive Officer, said in a statement.

This was Koraleski's first earnings call as CEO, since CEO Jim Young in March took a medical leave for pancreatic cancer treatment.

Union Pacific is the second major U.S. railroad to report quarterly results.

No. 2 U.S. railroad operator CSX Corp (CSX.N) on Wednesday said utility coal is its only unfavorable second-quarter business and reiterated its call for a record 2012 profit after reporting above-forecast first-quarter results late Tuesday.

(Reporting by Lynn Adler; Editing by Gerald E. McCormick and Maureen Bavdek, Gunna Dickson)